An ugly day in the neighborhood: The employees at Chef Zorba's Cuisine, at 2630 East 12th Avenue on Capitol Hill, say a year-old controversy is taking a toll on the restaurant--and that they're paying the price.

On two separate occasions in 1994, Zorba's owner, Alex Pappas, applied for and was denied a liquor license for a space at 2600 East 12th Avenue, one of several properties he owns along the street. Both times the surrounding neighborhood, including several of the leaseholders for his other buildings on that block, vehemently opposed the liquor store. Now two of those tenants, Carolyn and Larry Gibson, who own the Pantry Thriftway, at 2620 East 12th Avenue, want out of their lease, but they say Pappas has turned down their request for two reasons. "For one thing, he's mad at Carolyn and me because we didn't want that liquor store," Larry says. "And the other is that he doesn't approve of the people we want to sell it to."

The Gibsons claim the Greeks don't want no freaks--which Larry says is defined as "anyone who's not Greek"--running the grocery. "He told me I've tried to sell it to the wrong people," Larry says. "It just so happens that these people are Ethiopian, and I think that's the problem."

Not so, replies Pappas. "How can I be prejudiced against anybody else?" he says. "I'm from another country, too." Pappas explains that he just wants the "right people" at the grocery, which he defines as "people who will pay their rent and who will be good to the neighborhood." He hasn't seen any evidence that the group now wanting to buy the Pantry has run a grocery before, he adds, and that's important to him. "I would be happy to settle the matter if the Gibsons would come up with two or three candidates for ownership," he says. "And then I could choose the right ones. After all, it's my building. These people just want quick cash, and then I have to deal with what happens when they leave."

The Gibsons, however, say that the prospective owners have managed a grocery for many years, and they claim that Pappas is stalling until their lease runs out in a year and a half so that he can turn the space into a liquor store. And they told this to Walking Distance, a Capitol Hill publication that printed the story and threw the neighborhood into an uproar again. Pappas denies that he has such plans--"Why would I try for a liquor license again when obviously this area does not want that?" he asks--but his neighbors aren't so sure. "The other store owners and people who live in this section are very upset about this," Larry says. "They're getting ready to do battle again."

And so are the angry employees of Chef Zorba's, who say the controversy is affecting business. "You know, many of us have families and children to support," says Christopher Dover, who's worked at Zorba's for four years. "The people at the Pantry are making the community think that Alex wants another liquor store, and that's affecting innocent people. You can't just go around saying things like that because you're mad.

"Sure, it hurts Alex," Dover adds. "But it hurts us, too.